County faces cuts, possibly pay freeze as bill reaches governor

Assemblywoman Sharon Quirk-Silva, D-Fullerton, shepherded AB 701, a bill that would help Orange County cope with a $73 million annual loss in state revenue. RICH PEDRONCELLI, AP

With the governor poised to sign a bill finalizing $73 million of lost annual state revenue to Orange County, county leaders say the effects could be most felt by the poor, disabled and elderly.

Administrators plugged a similar budget gap this year using temporary fixes, but they are now digging into each department’s budget to see where they could make ongoing cuts.

Officials say they will do everything possible to preserve public safety and other key services, and to minimize job loss. The task is large, though: About $50 million this year came from one-time maneuvers such as spending reserves and deferring maintenance.

Steadily increasing sales tax revenue will help, officials say, but it may not be enough to preserve all social services or to support employee pay raises.

“You’re not going to see us go out there with a hatchet and cut a bunch of stuff,” Orange County Board of Supervisors Chairman Shawn Nelson said. “More of the need is just going to go unfulfilled.”

About $5 million could be trimmed from community services – programs such as child support, health care for the poor and foster care – according to a recent press briefing by the county finance director.

Also, as the county negotiates its labor contracts, the budget cut could be a significant bargaining chip for management.

“If our revenues are going to decline, and we’re already having a difficult time,” Supervisor John Moorlach said, “looking at any kind of wage increase is pretty remote.”

Representatives from labor unions, including the sheriff deputies and the general employees associations, lobbied in Sacramento to preserve as much of the funding as possible. Some spent this week monitoring the situation at the Capitol, until both chambers of the Legislature unanimously passed the bill Wednesday and Thursday.

“This was a positive example of collaboration between the county and labor to secure the best settlement possible,” Orange County Employees Association General Manager Nick Berardino said. “Now as we go forward into negotiations, we hope the county will continue that collaborative and cooperative approach.”

The fruit of their lobbying was AB 701, a bill that would help Orange County cope with the annual loss.

Shepherded by Assemblywoman Sharon Quirk-Silva, D-Fullerton, AB 701 would close a chapter of fiscal uncertainty in county government.

The funding struggle started in 2011, when Gov. Jerry Brown was seeking additional state revenue and seized on an anomaly: Orange County still received vehicle license fees, while other counties did not.

A relic of the 1994 county bankruptcy, the funds were pledged to pay off creditors. But county administrators failed to protect the funding during debt refinancing – some blame a clerical error – and the state ultimately cut off the money.

Then, the county withheld $148 million of property taxes in recent years to make up for the loss, and Sacramento sued to recover those funds. In May, a judge ordered the county to repay.

The bill extends the repayment terms of the $148 million. Originally, officials expected to pay the disputed funds over three years, but the bill spreads it out over five years, beginning in fiscal year 2014-2015.

“Orange County can finally move forward in this longtime dispute,” Quirk-Silva said on Thursday. “This gives us a little more security.”

The bill would also give the county about $3.5 million more initially than officials had expected. Initially, the hole was $76.5 million.

But bill’s co-author, Sen. Lou Correa, D-Santa Ana, negotiated a creative solution. If Brown signs the bill, the state would convert $50 million in special annual property tax revenue to a better formula. The funds would be tied to property tax rolls and could grow each year, instead of an essentially fixed allocation. The new formula would kick in at $53 million this year.

That means the county would essentially lose the $76.5 million, but would retain the $50 million and gain $3 million, with the potential to grow.

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